Small Business

Drink while you can...these bars are closing quickly

At many neighborhood bars, one day it's bottom's up, and the next day its lease is up.

A permanent last call is the fate a sizable portion of these bars have been facing for years. So far this year, U.S. neighborhood bars are closing at a rate of more than six per day, according to data from market research firm Nielsen, which tracked the state of the market as of Labor Day.

The trend suggests a confluence of factors both cultural and economic. Cain's Tavern, a former bar in the north Brooklyn neighborhood of Bushwick, is one establishment that met its fate in August after a proposed rent hike that co-owner Stevie Cain described as a "huge blow."

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Bartenders and regulars of Cain’s Tavern, a Brooklyn bar that shuttered in August.
Source: Cain's Tavern

"Business was steady," Cain said. "We were a small bar and had a huge group of regulars. We did good business." Apparently, that wasn't enough to absorb what came next.

"I was fully prepared to pay a reasonable increase. It was not reasonable."

Jamie Wiseman, principal at the landlord, Cayuga Capital Management, defended the increase, saying, "The reality is that is where the market is.

"It's just gone up a lot. The rental rates for Bushwick in the last five to seven years have tripled" for small spaces like that, Wiseman said. And he added that CCM had already found a tenant.

Cain said she is "casting a wide net" to find a new space for the bar and limiting the search to spots offering 10-year leases after her experience with a shorter lease.

As bars fade, eateries rise

Even as neighborhood bars decline in number, the overall on-premise market measuring outlets where alcohol is sold is growing. Most of this growth is coming from dining establishments, and may help explain why beer, wine and spirit sales have remained at lofty levels.

While neighborhood bar counts contracted 17.1 percent from 2004 to 2014, dining outlets that serve alcohol grew 40.9 percent during the period, Nielsen data showed. That fueled a 23.4 percent rise in on-premise outlets.

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"Just from what we know about consumer behavior, there does appear to be a push for more of an experience than a neighborhood bar provides," said Jon Collins, president of Nielsen CGA, in a phone interview.

Also, the neighborhood bar's decline has coincided with a surge in craft beer drinking, Mario Gutierrez, vice president, group client director at Nielsen/TDLinx told CNBC in the same phone interview.

"If you think about the neighborhood pub, it's not really in a position to offer 35 beers on tap," Gutierrez said. "That tends to be a specialized establishment."

Correction: This story has been updated to reflect that the interview with Jon Collins and Mario Gutierrez was the same interview.